A major new Smith Institute report, written by Ed Sweeney, the former chair of the Advisory Conciliation and Arbitration Service (ACAS), shows that Britain has too many poor performing workplaces where employees are often badly treated, underpaid, over-worked and ignored. This long tail of broken workplaces is holding back the recovery and costing the nation billions in lost income and welfare benefits to those in work.

The report, welcomed by Labour, the TUC, and EEF the employers’ organisation (see below for quotes), calls on government to do more to narrow the divide between the rest and the best and to positively intervene to tackle problems at work. The evidence to the report demonstrates the urgent need to improve employment conditions and raise management standards as a means to boosting productivity and making work better for the UK’s 30m workers.

The report is the product of a nine month inquiry on the world of work, involving research, interviews, discussion events around the country and opinion polling. It provides a comprehensive and up to date examination of the good and bad in Britain’s workplaces. It calls for a fresh approach to improving employment practices centred on the idea of ‘workplace citizenship’, with employees having a greater say, new employment rights and support for fair pay: including a right to request extra leave after five years of employment; rights to information on executive pay and low pay; extension of free childcare for working parents and ‘use it or lose it’ parental leave; reform of the ICE regulations to strengthen employee voice; and mandatory living wage contracts in all public procurement.

The report shows that Britain performs poorly across a range of indicators. The evidence in the report highlights:

  • Poor productivity: The USA, France and Germany are 30% more productive than the UK.
  • Skills mismatch: Almost half of employees think that their job does not make full use of their skills and abilities.
  • Insecurity: Over half of employees have recently felt worried or anxious about work and half are worried about the loss of job status.
  • Stagnating pay: Over 50% of people do not think that pay has kept up with living costs. Since 2004 wages for those on the median wage or less have been either stagnant or falling in real terms. Since 2010, median wages have fallen by more than 6 percent in real terms.
  • Pay inequality: Over the last thirty years executive earnings have grown ten times more than for the average worker.
  • Low pay and in-work poverty: Britain has a persistent low pay problem (21% are low paid today the same as in 1994). Over half of households in poverty have someone in work, which costs the treasury billions of pounds each year.
  • Inequality: The gender pay cap remains stuck at 20%, while just 18% of small and medium-sized enterprises (SMEs) are led by women.
  • Troubled workplaces: 50% of workers have experienced unreasonable treatment while 40% experience incivility and disrespect.
  • Lack of voice and autonomy:  The UK is at the bottom of the worker voice league table (27 out 28, behind only Lithuania), only a third of employees feel engaged at work, and a third feel they have a real say in how their work is organised.

The 100 page report contains 44 recommendations to government. These include:

Combating low pay and reducing wage inequality

  • The government should agree a new mandate with the Low Pay Commission on a five-year plan to increase the national minimum wage (NMW) towards 60 percent of median earnings. Tougher penalties for non-payment of the NMW should be imposed.
  • The government should set a target of lifting 1 million low paid workers on to the living wage by 2020. Government should become a living-wage employer and consider the case for introducing “living-wage contracts”, making use of procurement to ensure more private firms become living-wage employers.
  • The government should legislate to require public companies and large private companies to disclose the ratio of executive director rewards to the pay of their lowest/ median-paid workers, as well as the number of workers paid less than the living wage.
  • The government should introduce regulations to require employee representation on the remuneration committees of public companies; such regulations must ensure that representatives have the resources and support to undertake the task.

Tackling insecurity and promoting good work

  • The government should offer more support to local authorities and other public bodies that wish to use the power of procurement to “make work better”, for instance through living-wage contracts in public procurement.
  • The government should consider changes to company law to oblige lead contractors to exercise due diligence to ensure that all their suppliers and subcontractors fully comply with employment laws, such as the minimum wage.
  • To avoid the abuses of zero-hours contracts, employees should be free to work for other employers (ending exclusivity clauses), have the right to be offered a contract with minimum hours after a regular period in work, and be entitled to compensation when shifts are cancelled at short notice.
  • The government should follow the example of the Welsh government’s “two-tier code” for public service contracts and reform the Principles of Good Employment Practice to ensure higher labour standards.
  • The government should support the development of employment reporting and employment codes of practice. It should consider the case for a national employment standards kite-mark scheme.
  • The government should consider the idea of granting employees a legal right to request additional paid leave if they have worked for their employer for a period of more than five years.

Britain should invest significantly more in management training so that managers can manage their staff fairly and effectively. Sector skills bodies and trade associations could, for example, seek to make funds available for employers to support the implementation of the Health & Safety Executive’s successful Management Standards.

Reducing the gender pay gap

  • Equal pay legislation should be brought up to date so that it accommodates changes in the world of work, especially with regard to outsourced workers.
  • The government should seek to extend free childcare for working parents of children aged three and over from 15 to 25 hours. It should also consider extending paternity leave and pay from two weeks paid at the statutory rate to four weeks paid at 90 percent of earnings.
  • The government should consider introducing “use it or lose it” leave for both parents, underpinned by a higher rate of wage replacement.

Ensuring justice at work

  • The government should urgently reform the employment tribunal system to ensure affordability is not a barrier to justice. One option would be to require both parties to deposit a (low-value) bond with the tribunal, with the winning party receiving the full payment at the end of the process.
  • The government should consider reducing the qualifying period for unfair dismissal protection to one year.

Giving employees a fair say

  • The government should simplify and amend the existing Information & Consultation of Employees (ICE) Regulations to give employees a stronger collective voice and bring the UK more into line with other EU countries.
  • Government and the social partners should promote the idea of “workplace citizenship” as part of the solution to improving productivity and tackling the problems of short-termism and exploitation at work.
  • Government should grant ACAS a power to promote collective bargaining and good employment relations.

Shadow Business Secretary Chuka Umunna MP said: “I welcome the Smith Institute’s Making Work Better report which makes a valuable and timely contribution on how best we can ensure people have the security they need at work, can meet their aspirations and realise their potential. I’d like to thank Ed Sweeney and the Smith Institute for the detailed work and research which has gone into this report. In the last four years the Tory-led government has attacked people’s rights at work and we’ve seen a rising tide of insecurity with more than 1.3m people working part time because they cannot find full-time work. Zero-hours contracts, which were once a marginal and niche concept within the labour market, are fast becoming the norm in parts of our economy. Most people living in poverty in Britain today are in work, so the report is absolutely right to emphasise the challenge of tackling low pay. We need an economy producing more high-skilled, better-paid jobs which provide real security – that’s why the agenda set by Making Work Better is so important.”

Ed Sweeney, the report’s author said: “It’s time governments woke up to the fact that far too many of Britain’s workplaces are broken. The gap between the rest and the best is widening. The evidence shows that across all types of jobs, large numbers of workers are feeling insecure, ignored, mismanaged and are long overdue a pay rise. Tackling these long running weaknesses is a win-win-win for employers, employees and government. However, the recovery is being held back by the failure to improve our productivity, which is well behind our major competitors. To do that we are going to have to invest in our workforce, reward and treat people fairly and give employees more of say over their work.”

TUC General Secretary Frances O’Grady said: “Most people spend a large part of their lives at work, yet politicians have had little to say about the workplace in recent years. But this has to change. We will not have the growth and prosperity that we need without workplaces that are both productive and fair. With so many facing stagnant pay and too many new jobs made insecure through zero-hours contracts, agency working or low value self-employment we won’t fix the economy without fixing the workplace. That is why this report is so welcome.”

Verity O’Keefe, Employment and Skills adviser at the EEF said: “The report highlights some of the key challenges in today’s workplace and it is in the interests of both employers and employees that these are overcome. Our ultimate aim is a highly productive and flexible labour market. Flexibility is a two-way street, so nurturing relationships between employers and workers will be key to its success. What we must not do however is enforce unnecessary regulation on employers as a result, and instead focus on how we can better improve workplace relations through other channels. If the UK is to remain globally competitive, then we need to become more ambitious when it comes to jobs. Manufacturers are increasingly moving towards highly-skilled jobs, and with that comes greater rewards for workers. This will require not only employers supporting their existing employees to progress through the ranks, but action by government to ensure a pipeline of skilled talent is readily available.”